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Are we witnessing the death of the small client?
by Elsa Buchanan on Oct 04, 2013 at 10:57
‘The only reason for us picking thresholds is that even with the best will in the world, we can’t offer portfolios all in direct equities for that sum, and the client will also probably have a couple of unit trusts in it.’
Hodgson said Pilling can run money profitably for smaller clients with the firm charging 1% for its discretionary service and 0.5% for advisory on the first £250,000, with both rates dropping by half on assets over £250,000.
Economies of scale
‘I don’t think it is the death of the small client,’ Hodgson added. ‘The difference is not in the size of the client, but the size of the wealth manager, because bigger companies don’t appear to be able to offer bespoke services to clients. They can only offer standardised services.’
He added that the impact of regulation has seen larger companies ‘lose their ability to run economies of scale’.
‘The bigger the company, the greater the illusion that they have an economy of scale. It seems to work in an opposite way. Versus larger competitors, our cost base as a percentage of our funds under management means that we have a wonderful economy of scale.
‘People have to accept that there are certain minimum costs involved in having investments advised, or looked after, and those minimum costs tend to be bigger with larger companies,’ Hodgson said.
Maslinksi agreed that the impact of regulation has meant for a small client to be treated individually in the manner which private clients have come to expect is ‘probably a thing of the past’.
He added the industry needs to ‘clearly define’ which services the clients are receiving, whatever their size.
‘The industry has represented itself as giving individual service when often the nub of the service is really quite standardised, especially in big companies,’ he said. ‘The issue is how much does it cost to provide this kind of relationship service?’
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